Canada-EU free trade deal could cost up to 150,000 Canadian jobs: study

October 27, 2010

OTTAWA—A Canada-EU free trade deal would create a huge trade deficit for Canada, resulting in the loss of up to 150,000 Canadian jobs, says a study released today by the Canadian Centre for Policy Alternatives (CCPA).

The study, by economist and CCPA Research Associate Jim Stanford, models three scenarios to provide a range of estimates regarding the likely impacts of EU-Canada free trade. In every case, Canada’s bilateral trade balance worsens significantly. The simulations suggest an incremental loss of between 28,000 and 150,000 Canadian jobs.

Canada already has a large bilateral trade deficit with the EU—$15 billion in goods and close to $4 billion in services, and loses some 70,000 jobs as a result. A free trade agreement would make that imbalance worse, Stanford argues, for three key reasons: Canadian imports from the EU start out much larger than our exports there; Canadian tariffs are substantially higher than EU tariffs (and hence have farther to fall); and the Canadian dollar has recently risen substantially against the euro, making Canadian-made products much less competitive and overwhelming the benefits of tariff reduction on our exports.

“A free trade agreement with the EU will exacerbate Canada’s existing large bilateral deficit, at the expense of output and employment in many important sectors of the economy,” says Stanford.

The study estimates direct losses in Canadian GDP between 0.56% and almost 3%, experienced over several years of adjustment to the new trade pact. Indirect losses of spin-off production, employment, and investment could add significantly to those economic losses.

“Enhancing Canadian exports and diversifying export markets away from the U.S. are important economic policy goals for Canada,” says Stanford. “But merely signing another free trade agreement—even with a partner as important as the EU—has no chance of achieving either goal.”

“Free trade with Europe will take a bad situation for Canada, marked by large deficits and lost jobs, and make it much worse,” Stanford concluded. He proposed alternative measures to address Canada’s current trade failures with Europe, including pro-active support for high-tech Canadian exports, and measures to bring down Canada’s high-flying currency.